Neural responses to sanction threats in two-party economic exchange

Sanctions are used ubiquitously to enforce obedience to social norms. However, recent field studies and laboratory experiments have demonstrated that cooperation is sometimes reduced when incentives meant to promote prosocial decisions are added to the environment. Although various explanations for this effect have been suggested, the neural foundations of the effect have not been fully explored. Using a modified trust game, we found that trustees reciprocate relatively less when facing sanction threats, and that the presence of sanctions significantly reduces trustee's brain activities involved in social reward valuation [in the ventromedial prefrontal cortex (VMPFC), lateral orbitofrontal cortex, and amygdala] while it simultaneously increases brain activities in the parietal cortex, which has been implicated in rational decision making. Moreover, we found that neural activity in a trustee's VMPFC area predicts her future level of cooperation under both sanction and no-sanction conditions, and that this predictive activity can be dynamically modulated by the presence of a sanction threat.